As restaurants reopen and capacity limits hopefully become a thing of the past, online reservation platforms like Yelp, Open Table, and Resy are all booming. Diners want a seat at their favorite restaurant and, for the time being, operators are all too happy to outsource this function to third party platforms.
But, moving forward, how necessary will these systems be, will they be worth the cost, and will Google ever actually call a restaurant on my behalf? We are putting in the food service market research to answer these and other questions, but, we have to be quick.
My man and I have dinner reservations in two hours.
Shedding their Pandemic Fears, Diners Want Reservations
During the pandemic, for obvious reasons, online reservations plummeted. No need to go into further detail on that one—we were all there a year ago and none of us were trying to sit in a dining room. Because we couldn’t. Because they were closed. But if you need a refresher, check out this CNBC article from April of last year.
Yet as dining rooms have reopened with capacity restrictions and diners have been returning to their pre-pandemic in-person dining habits, online reservations have skyrocketed. So too has the number of restaurants enrolling in online reservation systems like Yelp, Open Table, and Resy.
Particularly as we proceed through this transitional phase of limited reopenings and cautious diners, online reservation systems have a lot to offer.
Why Restaurants are Embracing Online Reservations
So what do online reservation platforms offer restaurants?
First and foremost, during this transitional period of withering capacity restrictions, product shortages, and spiking demand, reservation systems allow restaurants to manage their capacity to stay below legal thresholds.
Sure, they can do this on their own, but the organizing and reorganizing such an undertaking would represent could well be a fulltime job for restaurants that are already grossly understaffed. By outsourcing this function, restaurants can rely on online platforms to control crowd flows. It is more efficient, and it is easier.
This is why many restaurants are going reservations only for the foreseeable future. Instead of directly seating walk-in guests, these guest are encouraged to make a reservation in the app. Even if a table is open and the diner could easily just be seated the old fashioned way, they are asking diners to nonetheless utilize the online system. This allows the restaurant to entirely outsource its crowd flow control, limiting capacity and ensuring adequate space for social distancing.
But social distancing won’t (we hope) be a thing for too much longer. What else do reservation systems have to offer?
One big thing is visibility. In the same way that GrubHub has become a directory of local restaurants, many diners turn to Yelp and other apps to find restaurants. Those that have enrolled on the app are likely to find increased interest and traffic merely by virtue of being visible.
Additionally, as technology advances, these platforms can allow customers to order and pay from directly within the app. This limits contact between staff and diners, and also frees already busy staffs from the burden of running checks back and forth.
All together, these platforms can offer a significant value to their restaurant clients.
Resy’s CEO Ben Leventhal, though admittedly biased, summed up his company’s value proposition rather succinctly.
"It has become clear that not just reservations, but technology more broadly, can play a really important role in helping restaurants manage their business operations, deliver safer hospitality, add new revenue streams, and make themselves visible to diners," Leventhal said.
Reservations About the Cost of Online Reservation Systems
So, during this transition period, the push to online reservation systems is understandable. The question is, moving forward, how necessary are these platforms and how can operators leverage them to maximize sales?
Sure, controlling crowds for health and safety purposes may be a fading need as the pandemic subsides, but increased visibility and revenue streams, and expedited payment systems are all enduring needs for restaurants. So, even post pandemic, the choice to jump all the way in seems like a no-brainer.
Until you check out the sticker price, that is.
Open Table’s cheapest plan charges $.25 cents per diner for each completed reservation, but this entry-level plan is not good enough for most restaurants. That’s because it does not allow them to text diners directly to confirm reservations or update wait times.
Reminding customers of their reservations via text and asking them to cancel their reservations if plans change (“please reply no by pressing 9”) is of paramount importance to restaurants. This is because missed reservations are a huge problem.
Reservations allow them to anticipate and plan around expected demand. But more importantly, every reservation that is broken represents a table that could have been filled by other diners. Confirming reservations increases the likelihood that customers will actually show up at the appointed time.
But if restaurants want to add this feature to their Open Table plan, the cost increases to a flat $249/month plus $1 per diner seated. The same is true with Yelp and Resy.
While that may not seem like a lot, it is important to remember how razor thin restaurants’’ margins actually are, particularly those that are independently operated. For more expensive restaurants with a higher cost per diner, the $1 fee isn’t gonna break the bank. But for mid- and lower-priced restaurants where the average check is roughly $14/diner, the cost is significant.
And these are still the entry level plans. Resy, for example, has one plan that is $899/month. This plan seamlessly integrates with a restaurants’ point of sale system, meaning diners can actually pay directly through the app. This streamlines operations—servers are not running checks back and forth—and increases spending. Additionally, this plan gives restaurants alerts when VIP guests arrive.
Real Life Market Research: A Quick Story
Now I am no VIP guest by any means, but I do want to share a story recently that tells us something about where online booking platforms are headed.
For a few minutes last week, I thought I was in the future when I made dinner reservations with Google’s Assistant. I’d recalled seeing demonstrations in the past, where an AI voice bot literally calls restaurants to place reservations for you, as though it were an actual customer. I imagined a robot making a phone call on my behalf, and I began to think about what this could portend for our future dining practices and even lifestyle patterns.
But my excitement was short lived. I quickly learned that Google Assistant rarely places these much-ballyhooed reservation phone calls. Instead, the assistant first looks for open reservations on third party platforms like Yelp or Open Table. If these options are unavailable, it then places a call to the restaurant if (and only if) that restaurant has already signed up to receive these types of reservations.
This is less like a robot voice from the future, more like a meta reservation system. And that meta reservation system is great—it eliminates the need to search from platform to platform to find the restaurant you want, and it streamlines the process by allowing diners to control their reservations from one hub.
When I got to the restaurant, I asked the hostess if my reservations were made by phone or online; it was online.
Nobody has reinvented the cheese wheel here.
This (admittedly long) detour is actually quite informative, however. Because it is clear that Google, and likely Apple as well, are working out ways to integrate themselves into online reservation systems. Right now, it is merely an overlay (Siri makes reservations through Open Table), but this is exactly the kind of business that Apple and Google want to be in. They have the user base, and they are developing the technology. We see a future where people book reservations directly through Apple and Google.
For those planning a return to the old normal where you called a restaurant the second they opened to score a window table that night, well, those days are likely behind us. Sure independent restaurants will still operate this way, particularly popular local joints who are getting by just fine.
But reservation’s future is online. This was true before the pandemic and will be true after it.